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Friday Inferno Market Report

Friday Inferno Market Report

Analysis

TL;DR The bear takes a brief pause, then continues his rampage.

Last week we saw a doji on the weekly candle, typically a sign of indecision that could signal either reversal or simply a pause before the trend continues downwards. This week, we’ve seen much reduced volumes, and some consolidation below the $4k mark. Overnight, that changed.

All week we had been sat in a falling wedge pattern that started almost 10 days ago. A falling wedge would typically be bullish, but the mood music isn’t good right now so this was one of the exceptions. We needed to break and close above the top line of descending resistance for a move up to be likely, around $4,000. But instead – as expected – we saw a break down from the channel to a new yearly low. Currently the low stands at $3,300 dead, but we expect that to change soon.

There should be decent support at $3,000. Back – waaaay back – when bitcoin was starting its run-up, there was a local top just under $3k in June 2017. Then, as bitcoin began its advance to the moon, there was a temporary pull-back in September – again to $3k. This point has never since been tested, and it seems implausible to suggest it wouldn’t be tested in this cycle. Whether it marks the end of the cycle and the start of the new one or a period of consolidation is another matter, but the odds of hitting $3k seem very high. It could be somewhat lower; reversion to mean is normal after a bubble pops and that could be somewhere between $1,500 and $2,500. But that could be some way down the line and the picture might well change before then.

Just so you’re aware: last time we saw capitulation, in January 2015, it was a 40% move to the downside over 2 days, before rapidly reverting and stabilising at prices 30% above that. For comparison – and it should be said this is a meaningless comparison without knowing where the capitulation move would start – if it happened at $3,500 then we’d see the price touch $2,100 before recovering to $2,700.

Bucking the trend, WAVES has had an awesome run-up, doubling in price in less than a week to top $2.10 on the back of its mobile app release. Now it’s correcting and will likely itself revert back to nearer the mean, possibly not far off $1. Right now it has corrected more than 50% of that run-up and sits a little above $1.40, or 0.00042 satoshis.

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